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Mid-Cap Short-Squeeze Opportunities

If there's ever been an industry that's taken heat from investors in the last two years, it's construction services. With the bursting of the real estate bubble and simultaneous seizing of the credit market, builders across the board saw their businesses slam to a grinding halt in 2008, leading to the industry's nearly 28% drop in the trailing 24 months. (The S&P 500 index dropped only 18% over that time.)

But with home purchases starting to come back to life in the last several quarters, now's a potentially strong time to invest in homebuilders. And there are few homebuilders trading publicly that have a better fundamental profile than NVR (NVR - Get Report), which has a short ratio of 13.7. The company operates using a novel business model that's allowed NVR to keep its land inventories significantly lower than those of its competition. As a result, NVR hasn't had the colossal write-offs that many other builders took in the last two years.

The company has even maintained its profitability despite one of the toughest housing markets is U.S. history. Despite the short-side sentiment behind it, NVR does have its proponents, such as the Dow Jones U.S. Home Construction Fund (ITB), an ETF that counts a stake in NVR as 10.3% of its entire portfolio. The fund's other holdings include Lennar (LEN) and Toll Brothers (TOL).
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GIL $31.06 0.00%
NVR $1,661.29 0.00%
TAC $5.22 0.00%
TGT $79.50 0.00%
WMT $66.87 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

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